The rise of the global middle class is one of the great economic triumphs of our time, or so we’re told repeatedly.
“For the first time, the number of people in the middle class surpasses those living in poverty,” says World Bank President Jim Yong Kim. “There is a class of nations in the middle that barely existed 50 years ago, and it includes more than half of the world's population,” promises Bill Gates, who also predicts there will be almost no poor countries left in the world by 2035.
The world’s poor are undoubtedly getting richer in aggregate, and the percentage of people in the world living in extreme poverty is lower than ever before. But before getting too excited about the coming of the middle-class world, it might be useful to think a little bit about what we mean by that term.
Middle class is as much a matter of perception as statistics—the number of Americans describing themselves as middle class has remained essentially unchanged in recent years even as their incomes and spending power have eroded. When the same term is used to describe an American household bringing in up to $100,000 per year (according to a recent poll; $250,000 if you’re Mitt Romney) and Laotians living on $2 per day (according to the Asian Development Bank), it may not be a very useful term.
Whenever you see a headline about the developing world middle class, take a look at the cutoff number being used. The African Development Bank claims that “the middle class had risen to 34 percent of Africa’s population, or nearly 350 million people”—a commonly repeated statistic in the media—but it also defines middle class as anyone living on more than $2 per day.
Using the same cutoff, the Asian Development Bank claims that the percentage of Asians in the middle class jumped from 31 percent to 82 percent over the past two decades. A recent report by the International Labor Organization boasted that 40 percent of workers in the developing world are now middle class, meaning in this case that they live on $4 per day. This prompted the Economist to proclaim that “workers in poor countries have never had it so good,” which, again, is technically true though a bit misleading to readers used to a developed-world definition of middle class.
Not surprisingly, you can get a very different picture of the world depending on which definition of middle class you use. A 2009 analysis by economist Martin Ravallion, then at the World Bank, now at Georgetown, found that between 1990 and 2002, 1.2 billion people in the developing world became middle class as defined by the $2-a-day threshold, while only 80 million, or 7 percent, became “Western middle class,” meaning they would not be considered poor by U.S. standards. (The current U.S. poverty line is $11,490 per year for a single person.)
It’s not surprising that countries—and the multilateral bodies that represent them or take credit for helping them—are eager to use the most generous numbers. “Developing countries that are growing fast take pride in that they’re getting richer and contributing more to growth at the global level,” Nancy Birdsall, president of the Center for Global Development, told Slate. “Part of the discussion for them is, ‘We also have now a middle class. We’re not just poor countries.’ ”
But the world, as a whole, is still a poor country. The standard way to identify the middle class is to find the number of people whose income is between 25 percent above and 25 percent below the median income. For the United States that gives you about 27 percent of the population. The rest of the population is either much richer or much poorer.
Looking at the world as one country, you find a statistical middle class of about 13 to 15 percent of the global population, a group living on between $4 and $6.50 per day.
“The world, if it were a single entity, would have a middle class about the size of Guatemala’s or El Salvador’s, and their average income would be one-half of the U.S. poverty line,” says Branko Milanovic, an expert on global inequality and senior scholar at the CUNY Graduate Center. “That implies that the world is not really a middle-class society.”